Qatar’s energy minister has warned that war within the Middle East could “bring down the economies of the world”, predicting that every one Gulf energy exporters would shut down production inside weeks and drive oil to $150 a barrel.
Saad al-Kaabi told the FT that even when the war ended immediately it might take Qatar “weeks to months” to return to a standard cycle of deliveries following an Iranian drone strike at its largest liquefied natural gas plant.
Qatar, the world’s second-largest producer of LNG, was forced to declare force majeure this week after the strike at its Ras Laffan plant.
While Qatar only exports a small proportion of its gas to Europe, the energy minister said the continent would feel significant pain as Asian buyers outbid Europeans for whatever gas is obtainable available on the market, and as other Gulf countries find themselves unable to fulfill their contractual obligations.
“Everybody that has not called for force majeure we expect will accomplish that in the following few days that this continues. All exporters within the Gulf region can have to call force majeure,” Kaabi said. “In the event that they don’t, they’re sooner or later going to pay the liability for that legally, and that’s their selection.”
Kaabi’s comments reflect rising concern within the Gulf in regards to the economic repercussions of the US and Israel’s war with Iran, which has wreaked havoc across the oil-rich region.
Brent crude rose 2.5 per cent to $87.6 a barrel on Friday morning in Europe following the publication of this text, the very best level for the reason that start of the conflict.
“This may bring down the economies of the world,” he said. “If this war continues for a number of weeks, GDP growth all over the world shall be impacted. Everybody’s energy price goes to go higher. There shall be shortages of some products and there shall be a sequence response of factories that can’t supply.”
He said while there had been no damage to Qatar’s offshore operations, the aftermath onshore was still being reviewed.
“We don’t yet know the extent of the damage, because it is currently still being assessed. It just isn’t clear yet how long it would take to repair,” he said.
Qatar’s $30bn development to extend production capability at its vast North Field gasfield from 77mn to 126mn tonnes a 12 months by 2027 would even be delayed, he added. The primary production was to start within the third quarter of this 12 months.
“It is going to delay all our expansion plans obviously,” Kaabi said. “If we come back in per week, perhaps the effect is minimal; if it’s a month or two, it’s different.”
He forecast that crude prices could soar to $150 a barrel in two to a few weeks if tankers and other merchant vessels were unable to go through the Strait of Hormuz, a key maritime trade route through which a fifth of the world’s oil and gas passes.
He predicted that gas prices would rise to $40 per million British thermal units (€117 per MWh) — almost 4 times the extent they were before the war began.
He added that the impact of the disruption of maritime trade through the strait would reverberate far beyond energy markets and hit multiple industries because the region produces much of the world’s petrochemicals and fertiliser feedstocks.
Traffic through the waterway has slowed to a halt for the reason that US and Israel launched their attack on Iran on Saturday. At the least 10 ships have been hit, insurance premiums have soared and shipping owners have been unwilling to risk their vessels and crews.
US President Donald Trump and Israeli officials have warned that the war could last weeks as they seek to destroy the Islamic regime. Trump said this week that the US navy will escort ships through the strait and has offered to offer additional insurance to shipping corporations.
But Kaabi said it might still be unsafe for vessels to go through the strait, which is just 24 miles wide at its narrowest point and traces the Iranian coastline, so long as the war was ongoing.
“The best way that we’re seeing the attacks, bringing ships into the strait . . . it’s too dangerous. It’s too near the shore to bring ships in. It is going to be difficult to persuade ships to go in,” he said. “A lot of the ship owners will see that they turn into an even bigger goal because they’re [Iran] targeting the military ships.”
Kaabi added: “Along with energy, there shall be a halt on all other trade in between the [Gulf] and the world, which can have a major effect on the economies of the [Gulf] and all of the trading partners all over the world.”
Qatar, which hosts the most important American military base within the region, has traditionally had good relations with Iran. However the Islamic republic has fired multiple barrages of missiles and drones at it and other Gulf states as Tehran sought to lift the stakes for the US by targeting energy facilities, airports, American bases and embassies.
Kaabi, who can be chief executive of QatarEnergy, said the corporate had no selection but to declare force majeure after Ras Laffan was hit in an Iranian drone attack on Monday. He cited safety reasons, adding that the corporate’s offshore facilities were also facing the specter of attack, although they weren’t damaged.
“We were actually informed by our military that there’s an imminent threat on the facilities offshore. So we shut down operations safely, as safely as we will, and we mobilised around 9,000 people in 24 hours and brought them back,” he said. “When we have now our people in peril and we’re actually being hit in a military zone and we will’t work anymore, and we will’t put our people in harm’s way, we have now to declare force majeure.”
Production in Qatar won’t restart until there’s an entire cessation of hostilities, he said.
“So the signal is when our military says there’s an entire stop of hostilities and we will not be being attacked anymore,” Kaabi said. “We will not be going to place our people in harm’s way.”
After the restart, he predicted huge logistical issues on top of the restoration of the machinery that cools and compresses gas into liquid that may be shipped.
“Our ships are in every single place,” he said, adding that only six or seven out of Qatar’s fleet of 128 tankers were at hand. “Each ship takes a day or two and you may load six or seven at a time,” he added, explaining the length of time it might take to revive normality.
He rejected the concept Qatar’s decision to invoke force majeure and miss shipments would damage the country’s long-cherished popularity as probably the most reliable supplier of LNG.
“We don’t think anybody would dare to return to us and say we will not be reliable since you were being bombed and you probably did not deliver,” he said.
Even when it desired to, Qatar was unable to seek out gas available in the market to make good the lost deliveries to its clients, he said. “Let’s assume you would like to buy 77 million and deliver it to customers, there is no such thing as a 77 million tonnes lying around so that you can buy.”
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